Paramount Global has escalated its ongoing hostile takeover bid for Warner Bros. Discovery (WBD) by announcing a significant personal financial commitment from Larry Ellison. On Monday, Paramount disclosed that Ellison, the billionaire Oracle co-founder and father of Paramount CEO David Ellison, is personally guaranteeing the $40.4 billion equity portion of Paramount’s $78 billion bid to acquire WBD.
This announcement aims to alleviate Warner Bros. Discovery’s board of directors’ longstanding skepticism concerning the robustness and genuineness of Paramount’s financing plan. The board has repeatedly turned down Paramount’s overtures, instead favoring a competing proposal from Netflix. According to the WBD board, Netflix’s offer provides greater overall value, and Paramount’s bid has been criticized for relying on “illusory” financing arrangements.
Paramount’s move to have Larry Ellison personally guarantee the entire equity stake he is contributing marks a substantive step to dispel concerns over the deal’s financial foundation. Such a guarantee represents a sizable commitment, exposing Ellison to potential liabilities approximating a sixth of his estimated $250 billion personal net worth should the transaction fail to complete.
Moreover, Larry Ellison has committed not to rescind his family trust, which holds a substantial stake in Oracle shares. This pledge serves to remove previous uncertainties about the accessibility of assets within the trust to support the financing package. Paramount has also released documents verifying that the family trust owns 1.16 billion shares of Oracle stock, countering questions posed by Warner Bros. Discovery’s board regarding this critical financing component.
In addition to reinforcing the financial guarantee, Paramount Amplified its breakup fee from $5 billion to $5.8 billion, now aligning it with the breakup payment that Netflix has proposed to Warner Bros. Discovery’s shareholders in the event the deal collapses. The increased fee is a strategic signal reinforcing Paramount’s commitment to the transaction’s completion.
Importantly, the overall valuation of Paramount’s proposal remains unchanged. Paramount continues to value Warner Bros. Discovery at $30 per share, a figure that encompasses assets such as CNN and various cable channels. Netflix’s own bid stands slightly lower at $27.75 per share but excludes these cable-related assets.
Warner Bros. Discovery and Netflix assert that anticipated plans to spin off Warner Bros.’s cable properties will enhance the aggregate valuation of the company beyond the figures presented by Paramount, thereby justifying the board’s preference for the Netflix offer. This valuation discrepancy lies at the heart of the board’s rejection of Paramount’s bid.
The Warner Bros. Discovery board is presently tasked with responding to Paramount’s latest revised proposal. Although the increased financial guarantees and higher breakup fee address some concerns articulated by the board, full acceptance is not guaranteed. The board’s ultimate decision remains uncertain, particularly because the hostile nature of Paramount’s bid could motivate WBD shareholders to act against the board’s recommendation.
It is notable that Paramount’s financing is supported by investment from Middle Eastern royal families, including those of Saudi Arabia, Qatar, and Abu Dhabi. The Warner Bros. Discovery board has expressed unease over Larry Ellison’s perceived reliance on external financiers, given his personal wealth. Paramount has characterized its financial backing as “air tight” and CEO David Ellison has dismissed the board’s skepticism as “absurd.”
Following the announcement, Warner Bros. Discovery’s shares increased by 4% on Monday. Paramount’s stock experienced a 3% rise, while Netflix’s share value remained steady with no significant change.
The situation remains dynamic as both Paramount and Warner Bros. Discovery stakeholders assess the implications of the enhanced offer and the competing bids. Paramount’s personal guarantee by Larry Ellison represents a pivotal development in this high-profile acquisition battle.